UK party leaders have flown to Edinburgh to put their weight behind the ‘NO’ vote. Is it too little too late? Will it be perceived as a desperate measure? I think they’re damned if they do damned if they don’t. One thing is for sure - this is going to be the main headline and driver for Sterling up until voting day. Should it be a YES vote then the following day, who knows what will happen!? Sterling is still pressured to the downside and I think this will continue for the next 8 days.We have Inflation report hearings out of the UK this afternoon that may cause further volatility for Sterling. The Eurozone has almost taken a back seat on the news front. I still expect considerable EUR weakness in the next few months. EUR/USD has dropped around 1.40 down to below 1.30. I expect this fall to continue and we’ll see EUR/USD around 1.20 in the next 6 months.
GBP/EUR has fallen off from recent highs however we’re still at very attractive levels. I would suggest looking at covering off your exposure before the vote next week. Could Sterling drop by 5%? Quite possibly. It may of course do nothing at all and remain in the same range. However, I would be surprised if that is the case. Therefore, it would be prudent to have something in place. Please contact myself or one of the trading team to have a discussion on how we can best assist.
Written by Liam Alexander